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Over 60 companies will undergo the "lock-up test" between now and the end of 2012, including...
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Sunday, August 19, 2012, 5:22 AM ETOver 60 companies will undergo the "lock-up test" between now and the end of 2012, including Yelp (YELP), Splunk (SPLK) and Carlyle Group (CG). One assumes shareholders and companies hope the stocks will do better than those of Facebook (FB) and Angie's List (ANGI), which plummeted last week following the end of lock-up periods. For a list of expiration dates, see here.
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Splunk...P/S>21x...... relatively small existing float
The problem with GRPN, ZNGA, FB ... relatively massive amount of outstanding/float
Good point and a possible trading idea. Oops, just checked on the YELP put options and they are pretty pricey. Guess da boyz may be expecting some pretty big downside.
The vehicle I wish existed is synthetic share issuance. I would like to write you a contract that requires me to pay you all the dividends, interest, and liquidation distributions (but not forced conversions resulting from the sale of the company or voting or any other rights granted to shareholders) that you would receive if you had owned the shares for a fixed number of years, ideally a long period of time such as 30 or 99 years. In exchange, you would pay me a premium, logically smaller than the current share price since the contract would come with four downsides relative to the shares:
1. Credit/counterparty risk.
2. Limited time horizon.
3. No ability to profit from a sale of the company.
4. Limited liquidity.
This could be sold at an up-front cost similar to an option premium, or could be executed as a swap against a fixed or floating fee. In the up-front implementation, any forced conversion of the shares as in a sale would terminate the contract and require the issuer to rebate a pro-rated portion of the premium. If done as a swap, the contract would simply terminate.
The existence of such contracts would not only be a spectacular way to make money betting against terrible companies regardless of how long the market remains irrational in its assessment of those companies or the cost of borrowing shares to short, it would also provide a clear metric for the market's opinion of them. The larger the spread between the dividend contract price and the share price, the more disconnected the share price is from fundamentals and therefore the greater the degree of market speculation (or, perhaps, the friction caused by high borrowing costs). Issues with high spreads could clearly be identified as instances of market insanity, giving investors additional warning that the security is overvalued and an opportunity to get the benefit of owning it without paying the premium generated by momentum traders or speculators.
While I don't normally trade and never from the short side because I am unwilling to take on leverage or put my fate in the hands of the market, I would be very happy to write such contracts against a large number of obviously hopeless companies that I am very confident will never return a dime to their shareholders. I would also consider buying them in cases where I believe in a company whose share price is also being inflated by speculation, or where I don't care about, and therefore don't want to pay for, dividends that will be paid out after I'm dead. These synthetic shares would be a tremendous boon to investors. It's too bad they don't exist, at least not in any standardised accessible form.
Also, ****correction**** the massive insider selling was for SPLK. Take a look, it's a little scary (and $3 below current market price but may indicate a ceiling)